The Deepak Parekh Committee on US-64 has hit out against the assured return schemes from UTI and has said in no uncertain terms that the Trust has not been responsive to changing market conditions. The panel has suggested that the concept of assured return schemes in an era of volatile interest rates should be done away with in respect to all mutual fund schemes in the country.

A quick estimate of UTI's mop up in calendar 1998 reveals that the mutual fund behemoth has mobilised a staggering Rs 7,360 crore through assured return schemes in 1998. Thus, of the total fresh investments of Rs 8,515 crore, an astounding 86 per cent came by way of assured returns.

The assured return bandwagon included monthly income plans, institutional funds and special purpose vehicles like the Rajlakshmi Unit Plan(RUP II). Between January and December 1998, the Trust launched as many as five monthly income plans and two institutional funds. Besides, UTI launched three equity schemes and an open-ended bond fund.

As on December 31, 1998, the unit capital of the bond fund was Rs 346 crore, the highest among the non-assured return funds that hit the market in 1998. UGS 10000, which was exclusively offered initially to investors of UGS 2000 and UGS 5000, was later converted into an interval fund with sale and repurchase of units in the first week of every month. An MNC fund, it had a unit capital of Rs 69 crore as on December 31, 1998. The other two equity funds were specialised funds with Master Index Fund, the first index fund in the country, and Master Value Fund, which invests in the B group of the Bombay Stock Exchange. The two had a unit capital of Rs 179 crore and Rs 100 crore, respectively.

Among the assured products, IISFUS (I) and IISFUS (II) offered a coupon of 13.5 per cent and 14 per cent, respectively,and saw a combined inflow of Rs 2,041 crore. The five monthly income plans (MIPs) doled out an identical coupon of 12.5 per cent, payable monthly, and mopped up Rs 4,800 crore.

The other funds, which saw a net inflow, included the special purpose plans like Senior Citizens Unit Plan, Retirement Benefit Unit Plan, money market mutual fund and US-1971 (or ULIP). ULIP saw the maximum inflow in the special funds category of Rs 400 crore. The assured returns funds in this category are Children Gift and Growth Fund, Children College and Career Unit Plan and RUP (II), which collected Rs 526 crore.

"Two-thirds of UTI is already in trouble on account of US-64 and equity funds. If the rest (assured return funds) are stopped, UTI will be in real big trouble," said an analyst. The size of assured return funds under UTI is estimated around Rs 20,000 crore. "With this liability, no international mutual fund can dare to pick up a stake in UTI," he added.

All the open-ended equity funds and those with repurchase saw anet outflow in 1998. Mastergain saw the maximum redemptions of Rs 214 crore followed by Masterplus at Rs 177 crore. US-64 also saw a net outflow of Rs 111 crore.